Sunday, November 04, 2007

Nigeria: High on Oil but Low on Power

Nigeria produces the largest amount of crude oil in Africa, but its energy generation capacity is one of the lowest in the world. Last year, former President Olusegun Obasanjo used money from the excess crude account to fund construction of power plants. Nigeria’s current President, Musa Yar`Adua, has put adequate power as one of the priorities of his administration. However, Yar’Adua announced that the Federal Government will no longer use money from the excess crude account to fund Nigeria’s power plants. The excess crude account consists of money gained by Nigeria over its cost as set in its national budget.

This decision to stop using the excess crude account for power plants was hinged on “the legal implications” of such action. The money belongs to the three tiers of government, so Nigeria will have to find money elsewhere for the power plants.

In the past, Nigeria has faced many problems with producing sufficient amounts of electricity. Additionally, recently there have been concerns about Nigeria’s oil pipelines being sabotaged. As a result of these disruptions, foreign investors are hesitant to invest money in Nigeria. However, Yar’Adua hopes that the reform of the power sector will promote local and foreign investors to invest in the country.

Discussion question:Will this type of investment by Nigerians in the Diaspora be enough to draw other investors into Nigeria’s energy plan, given some of the political and social difficulties the country is facing?

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